Today’s Blog – Friday 17th April 2015

Its been a good week for the oil price, with last night’s closes at calendar year highs in both London and New York. As often in the oil game however, what is good news for oil prices (if you are a buyer) is often bad news for humanity generally.

Commodity prices

Brent closed at what in these straitened times seems like a hefty US$63.98 and WTI did so at US$56.63. The key driver in the rise was geopolitical – the seizure of a key crude export facility in Yemen by an Al-Qaeda affiliated group. Although this facility does not handle a lot of crude in a global volumetric sense, the market no doubt reacted to the potential implications if this sort of thing ever happened in the neighbouring Kingdom of Saudi Arabia.

Henry Hub closed up again at US$2.68.

LNG

The Siberian Yamal LNG project (arguably a political development rather than an economic one) continues to seek finance (outside from the Russian Government) – but appears to be challenged in doing so. Like the smallest resource junior in Australia, there is always hope that money will come from “a Chinaman”. However, the PRC does not seem to be rushing at this point to pump unending cash into Russia (and in my view, would prefer to take a larger investment role in the Power of Siberia pipeline and its related Eastern Siberian gas-fields).

One of the stranger companies listed on the ASX, Energy World Corporation (EWC), put out a lengthy set of slides (mostly pictures) earlier this week, which provided an update on the company’s Sulawesi based integrated gas-field/liquefaction plant/ power generation development. The liquefaction plant appears to be making progress towards commissioning later this year. EWC now arguably has the most valuable suite of energy assets of any ASX company in Indonesia (even bigger than Santos).

This company’s market capitalisation of A$667M (built on hard assets, some of which already produce cash-flows) compares with LNG Ltd’s (ASX: LNG) of A$2B (based on some land holdings and MOUs). EWC appears to be weighed down by issues such as the MD’s controlling stake, related party dealings, nepotism, project delays, etc – but still this is a big value gap.

Governments and fracking

We appear to have gone two whole days and no Government has announced a moratorium into fracking. “We’re all doomed, Mannering!”

Company news – Woodside Petroleum Ltd (ASX: WPL)

WPL yesterday held its AGM. Judging by the published Chairman’s and CEO’s speeches, it was not exactly a riveting affair (yes we know that the doors marked “fire exit” are the fire exits).

The forthcoming Santos AGM should be more exciting, given the company’s 50% reduction in market cap and the mysterious recent “retirement” of the company’s Chairman.

Company news – AWE Ltd (ASX: AWE)

AWE put out a drilling report yesterday afternoon on its Irwin-1 exploration well in the Perth Basin, which indicated that gas shows had been encountered in the primary target formation. The ASX came out after a ~10% rise in the share price, which would lead cynics to conclude that the proverbial hotline between the rig and a broker’s office was in operation.

Such cynicism aside, this appears to be another favourable development in AWE’s exploration efforts in this area (and from a well which seems to be powering ahead, fingers crossed).

Company news – Oil Search Ltd (ASX: OSH)

In what could be either terrible or great timing, OSH and Petsec Ltd (ASX: PSA) today announced that the latter had bought an asset from OSH in Yemen. A trip by PSA’s Directors to inspect the new asset might have to wait a while…..

Company news – Santos Ltd (ASX: STO)

STO issued its quarterly report this morning. Progress on GLNG was advised as going well, with first cargoes now due at the end of Q3. The company managed to sneak in a bit more good news about its recent Malaysian oil discovery (no doubt Petronas is sensitive about disclosure). A second well (an appraisal well?) is drilling ahead and if successful this could give STO its largest oil discovery for many years.

Quote of the day

One from a more carefree time, some classic advice from P G Wodehouse on speech making – which Messrs Chaney and Coleman did not appear to take yesterday in Perth:

“It just shows what any Member of Parliament will tell you, that if you want real oratory, the preliminary noggin is essential. Unless pie-eyed, you cannot hope to grip“. Right Ho, Jeeves